The average duty levied on textile and apparel imports from India into the EU is around 9.60%. Because of the large tariff differential, importers in Europe are compelled to purchase more from India’s rivals. If the EU-India FTA discussions are successful, Indian factories’ clothing exports to Union nations are extremely likely to increase.
The European Union has long been a prospective destination for the Indian clothing export sector, and with good reason: the Union’s garment market is worth over US $ 350 billion. However, India’s clothing export to the EU is not encouraging when compared to neighbouring countries such as Bangladesh, and COVID-19 has further reduced export values.
According to the Ministry of Commerce and Industry, India’s exports to the EU totaled US $ 4.52 billion in 2019, a decrease of 24.46 percent from the previous year, when clothing exports were US $ 6 billion — owing to COVID-19. This represents roughly 37% of India’s overall clothing export value in 2020.
In contrast, according to statistics accessible on the Export Promotion Bureau (EPB, Bangladesh) in 2020, Bangladesh’s share of apparel exports to the EU was 61.96 percent, which was about three-and-a-half times more than what India accounted for! If the United Kingdom is removed from the list of EU destinations since it has already left the Union, India’s export value falls to US $ 3.40 billion.
Here is how India compares to other nations that send clothing to the EU…
According to the most recent EUROSTAT statistics, apparel imports to EU Member States dropped by 14% in value in 2020 compared to 2019 and totaled US $ 82.26 billion.
To prevent the spread of the COVID-19 pandemic in 2020, nations throughout the world implemented a range of restrictive measures that harmed international commerce in products, including clothing trade.
China remained the primary source of imported clothing by EU nations, accounting for around US $ 25 billion in sales and accounting for almost 30% of total EU import values.
Bangladesh contributed 18% with US $ 14.30 billion in shipping; Turkey contributed 12% with US $ 9.54 billion; followed by the United Kingdom (US $ 4.77 billion, or 6%), India and Vietnam (both US $ 3.40 billion, or 4%), and Cambodia (at US $ 2.39 billion, or 4%). As a result, with only 4% of the market, India is ranked fifth.
In terms of the EU’s top clothing markets, Germany, Spain, and France, among others, fell due to closed markets and poor consumer spending once markets reopened following lockdowns. As a result, India was impacted as well, and its exports to these markets dropped flat.
During 2020, Germany was the EU’s largest clothing importer, with nearly US$ 20.27 billion in clothing imported by German buyers from non-EU member states, accounting for approximately 25% of total EU clothing imports from non-EU member states – making Germany the largest EU clothing importer, ahead of Spain (US$ 11.93 billion, or 15%), and France (almost US $11.70 billion).
Along with the recovery in traditional EU nations, India must pursue Hungary and Denmark to enhance exports…
The top five EU destinations – Germany, France, Spain, the Netherlands, and Italy – all saw a decrease in their respective RMG imports from India in 2020. It is worth noting that, with the UK omitted, these five countries accounted for 73.48 percent of India’s overall export to the EU.
While the EU-India FTA discussions will seek to increase India’s textile exports to these five traditional and top markets, the other two growing markets – Denmark and Hungary – must not be neglected.
Denmark ranked sixth among EU clothing export destinations for India in 2020, with an export value of about US $ 231.95 million, representing a 3.29 percent year-on-year increase.
Though the rise in shipping to Denmark appears to be minor, it cannot be denied that growth was observed during the COVID-19 impact period. In contrast, Bangladesh’s clothing exports to Denmark fell by 0.51 percent in 2020. The development of India in the Danish market appears to be more than a one-time occurrence, since future predictions for this developing retail industry are largely favourable.
Denmark’s clothing sector is predicted to generate $4.58 billion in revenue in 2021, with a 4.02 percent annual growth rate (CAGR 2021-2026). As a result, entering this expanding industry at an early stage will provide the groundwork for future Indian plants. In contrast, Bangladesh’s clothing exports to Denmark fell by 0.51 percent in 2020. The development of India in the Danish market appears to be more than a one-time occurrence, since future predictions for this developing retail industry are largely favourable.
Denmark’s clothing sector is predicted to generate $4.58 billion in revenue in 2021, with a 4.02 percent annual growth rate (CAGR 2021-2026). As a result, entering this expanding industry at an early stage will provide the groundwork for future Indian plants.
Another expanding market is Hungary, which imported US $ 21.16 million in clothing from India in 2020, up from US $ 2.79 million in 2019, representing a 658.42 percent year-on-year increase in a pandemic-ravaged year. Notably, according to ITC statistics, Hungary imported US $ 1.56 billion in clothes from throughout the world in 2020, with India accounting for only 1.35 percent of this total. Since India’s garment export to this tiny but promising European destination appears to be picking up steam, the country has a good chance of increasing its market share in Hungary in 2021 and beyond. According to Statista, the total sales in the clothing category in Hungary was US $ 2.07 billion in 2020 and is predicted to rise by 16.2 percent annually from 2021 to 2025.
The possibilities of India’s expansion in Denmark and Hungary are strong because both of these nations are recognised for sourcing high fashion clothes in small numbers, which India already has an advantage over its Asian rivals in.
What is ahead for India…?
Until recently, India has been unable to significantly expand its market share in the EU apparel market, owing to the ‘zero’ tariff incentive provided by the EU not just to Bangladesh, but also to rival nations such as Pakistan, Sri Lanka, and Vietnam. Because of the large tariff differential, importers in Europe are compelled to purchase more from India’s rivals. If the EU-India FTA discussions are successful, Indian factories’ clothing exports to Union nations are extremely likely to increase.
Aside from that, what better nation in terms of logistical network would there be for EU customers than India? India does have 13 major ports, which adds to the advantages EU importers would have if they boost sourcing following the conclusion of the FTA discussions. Because of its extensive logistics network, India can send items to the EU faster than Bangladesh, Sri Lanka, and even Pakistan.